Entrepreneurship in a Knowledge based Economy

The knowledge economy is a term that refers either to an economy of knowledge focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge technologies to produce economic benefits as well as job creation.

The essential difference is that in a knowledge economy, knowledge is a product, while in a knowledge-based economy, knowledge is a tool. This difference is not yet well distinguished in the subject matter literature. They both are strongly interdisciplinary, involving economists, computer scientists, engineers, mathematicians, chemists and physicists, as well as cognitivists, psychologists and sociologists.

Various observers describe today's global economy as one in transition to a "knowledge economy," as an extension of an "information society." The transition requires that the rules and practices that determined success in the industrial economy need rewriting in an interconnected, globalized economy where knowledge resources such as know-how and expertise are as critical as other economic resources. According to analysts of the "knowledge economy," these rules need to be rewritten at the levels of firms and industries in terms of knowledge management and at the level of public policy as knowledge policy or knowledge-related policy

Concept:

A key concept of the knowledge economy is that knowledge and education (often referred to as "human capital") can be treated as one of the following two:

A business product, as educational and innovative intellectual products and services can be exported for a high value return.

A productive asset

It can be defined as

"The concept that supports creation of knowledge by organizational employees and helps and encourages them to transfer and better utilize their knowledge that is in line with company/organization goals "

The initial foundation for the Knowledge Economy was first introduced in 1966 in the book The Effective Executive by Peter Drucker. In this book, Drucker described the difference between the manual worker and the knowledge worker. The manual worker, according to him, works with his hands and produces goods or services. In contrast, a knowledge worker works with his or her head not hands, and produces ideas, knowledge, and information.

The key problem in the formalization and modeling of knowledge economy, is a vague definition of knowledge, which is a rather relative concept. For example, it is not proper to consider information society as interchangeable with knowledge society. Information is usually not equivalent to knowledge. Their use, as well, depends on individual and group preferences (see the cognitive IPK model) – which are "economy-dependent"

Knowledge Based Entrepreneurship:

Knowledge entrepreneurship describes the ability to recognize or create an opportunity and take action aimed at realizing the innovative knowledge practice or product. Knowledge entrepreneurship is different from ‘traditional’ economic entrepreneurship in that it does not aim at the realization of monetary profit, but focuses on opportunities with the goal to improve the production (research) and throughput of knowledge (as in personal transformation (Harvey & Knight, 1996)), rather than to maximize monetary profit. It has been argued that knowledge entrepreneurship is the most suitable form of entrepreneurship for not-for-profit educators, researchers and educational institutions.

In the industrial economy of the 20th century, large corporations drove economic progress.

In the knowledge economy, the drivers of change will be small businesses.’

The past thirty years have seen a huge change in the structure of employment in the UK. In1978 more people worked as employees in manufacturing (just under 30 per cent) than in theindustries subsequently classified by the OECD as ‘knowledge intensive services1(just over 25per cent). By 2007 just over 10 per cent of employees worked in manufacturing and over 40 percent worked in knowledge intensive services.

The knowledge Entrepreneurship Model:

Following Clark, (1998, , 2004) “entrepreneurial” can be used as a characteristic not only applied to individuals, but to organizations as social systems, as well as to projects. However, in contrast to Clark, the dynamic process of vision, and change aspects of entrepreneurship (Kuratko, 2006; Schumpeter & Opie, 1934), also known as entrepreneuring are stressed. Thus entrepreneurship is the act of pursuing new ways of doing thing in a real context, or more concretely “the essential act of entrepreneurship is new entry” (Lumpkin & Dess, 1996). Or as Brown put it: “Entrepreneurship is a process of exploiting opportunities that exist in the environment or that are created through innovation in an attempt to create value”

Model of knowledge entrepreneurship. Used in Senges 2007 and adapted from McDonald 2002

This forward looking notion is nicely depicted by Kanter (1983). According to her, entrepreneurs and entrepreneurial organizations “always operate at the edge of their competence, focusing more of the resources and attention on what they do not yet know (e.g. investment on R&D) than controlling what they already know. They measure themselves not by the standards of the past (how far they have come) but by visions of the future (how far they have yet to go). And they do not allow the past to serve as a restraint on the future; the mere fact that something has not worked in the past does not mean that it cannot be made to work in the future. And the mere fact that something has worked in the past does not mean that it should remain.”

Using McDonald (2002, pp. 12–33), the following specific set of attractors have been proposed by Senges (2007) to directly influence the knowledge entrepreneurship ability Environmental awareness describes with what practices and with what intensity the organization gathers information about its external and internal environment. The importance of this practice for the establishment of an entrepreneurial organization was also recognized by Cornwall and Perlman (1990). They write: “Scanning should be a fundamental part of every manager’s job, not something that is done by top management in conjunction with the annual update of the strategic plan“. As such the concept includes activities like internal needs analysis, benchmarking and inter-organizational networking. The organizations attitude towards the risk inherent in the pursuit of all innovation is captured under the concept of risk tolerance. A factor which has not been part of McDonald’s model (and which replaces the variable named analytical diligence ) covers the organizations vision in the sense of entrepreneuring (Kuratko, 2006). This ability is strongly related to strategic thinking and planning, describes its culture of envisioning and scouting new developments. New project support refers to the degree to which new initiatives are institutionalized as a means of institutional development. Thereby the monetary means, as well as managerial attention given to experimental projects is looked at. Communication is the last variable taken into consideration as a major influence for knowledge entrepreneurship. The organizational style of communication and the richness of communication channels are evaluated here. [[ Furthermore the organizational condition, described through its setting and its current leadership and its organizational culture are set to determine the general possibilities for knowledge entrepreneurship to occur. Thereby the organizational setting represents the basic factual being of the organization; its size, type of institution, business model, history and historic approach to innovation. Under leadership the style and values embraced by the current top decision makers, as well as the governance structure itself is evaluated. The concept of organizational culture is central to the understanding of the enabling or discouraging condition of the organization, as it adapts its attitude towards organizational learning and whether values like innovativeness, competitiveness, entrepreneurship etc. are embraced or rejected.

On the output side, knowledge entrepreneurship is set to improve innovativeness and thereby indirectly improve performance. But “the most important outcome of organisational entrepreneurship is long term: an organisation that is better able to adapt and survive.”